TOM FOWLER, Copyright 2011 Houston Chronicle |
January 27, 2011

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ConocoPhillips' fourth-quarter profit was right on target with Wall Street expectations and is a likely indicator of year-end earnings other oil majors will report over the next week.

The Houston-based integrated oil and gas giant said its quarterly profit climbed 46 percent to $1.9 billion, or $1.32 per share, up from the $1.20 per share a year ago, excluding asset sales. Analysts polled by Thomson Reuters predicted $1.32 per share. Including asset sales, the quarterly profit figure was $2.04 billion.

Full-year profit was up 100 percent to $8.8 billion, excluding asset sales and other special items.

Quarterly revenue was $53.2 billion, up from $43.7 billion a year ago.

"It was about as plain and clear as you can get," said Fadel Gheit, an analyst with Oppenheimer & Co. "They continue to do what they promised to do."

Shares of the company rose $1.77 to $69.25 in trading Wednesday on the New York Stock Exchange.

ConocoPhillips is the first of the oil majors to report earnings. Chevron reports on Friday, Exxon Mobil on Monday, BP on Tuesday and Royal Dutch Shell on Wednesday.

Its results are a good indicator that the other majors will show strong numbers as well, Gheit said.

"Chevron has higher exposure to oil, so they will probably report a bit better, and Exxon has more natural gas exposure, so they might be not quite as strong," Gheit said. "But directionally it will be the same."

Benchmark crude ended the year at $91.38 a barrel, up about $10 from the price last January. Natural gas dropped during the year from $5.88 to $4.41 per million British thermal units, according to the U.S. Energy Information Administration.

ConocoPhillips, the nation's third-largest oil company, is shedding assets to improve its mix of businesses in response to Wall Street's view the company is lagging the rest of the supermajors.

In 2010 the company generated $15.4 billion from asset sales, including $8.3 billion from selling shares in Russian oil giant Lukoil.

Selling more assets

In a conference call Wednesday, the chief financial officer, Jeff Sheets, indicated the company may be on track to sell more assets than it originally targeted.

The company's refining business continued to recover from the crash in gasoline demand that began in late 2008, with refinery utilization at 85 percent. Sheets said he expects utilization to reach 90 percent this year.

Exploration and production showed improvement as well, largely due to the continued focus on onshore natural gas projects in North America. The company added 110,000 acres in the last year and is moving forward with appraisal and drilling programs in the Eagle Ford shale in South Texas, the Bakken shale in North Dakota and Montana, and the Barnett shale in North Texas.

$10 billion in cash

ConocoPhillips ended the year with more than $10 billion in cash, Sheets said, and much of that likely will go toward repurchasing outstanding company shares. With more than $4 billion in shares repurchased last year, the company could outpace its previously announced goal to buy up to $10 billion in shares every two years.

ConocoPhillips Chairman and CEO James Mulva said previously the company was looking to get a bigger foothold in the Gulf of Mexico, a plan that Sheets said is still on the table, with an eye toward up to $3 billion in acquisitions.

When the company makes a move in the Gulf is largely dependent on how patient other lease holders in the region are under the pall of regulatory uncertainty resulting from last year's disastrous oil spill.

"There does need to be greater regulatory certainty before we will know how things in the Gulf will play out going forward," Sheets said. "That plays a big part in companies' plans for changing their asset mix, and it tends to slow down transactions."